Two Years Instead of one to Set Italy's Budget Straight

Silvio Berlusconi, the Italian Prime Minister won some fiscal freedom, granted by the European Commission to maneuver before the national elections, which will be held by May 2006. This means Italy will now have two years instead of one to fix the country's widening budget.

Joaquin Almunia, EU monetary affairs commissioner, said that Italy's decline into recession is due to special circumstances and so needed a longer period for the country to get back on track and settle a deficit limit below the 4% mark set by EU. The commission has estimated a deficit of 3.6% this year and 4.6% in 2006.
It was 3.2% last year.

This could also be the beginning of a more relaxed fiscal discipline, imposed by Mr. Joaquin Almunia. The EU commissioner said normally a country would be allowed 12 months to correct an "excessive deficit", but both old and new versions of the stability pact state a two-year period for countries to fix fiscal problems under special circumstances.

Italy could have this period prolonged after the 2007 deadline if the deficit remains above 3 per cent because of lower-than-expected growth currently predicted at 1.5 per cent in 2006 and 2007.